Shippers Guide is the learning page of MMS Plus newspaper. Here you learn the 5Ws and most important ‘H’ on various aspects of shipping. This week, we will take you through a detailed process of how to start a successful real estate business in Nigeria.
Real estate in Nigeria is serious business. As a matter of fact, one of the longest-standing industries in Nigeria is the real estate industry. The industry has become a gold mine over the years, and many smart entrepreneurs have tapped into it and are making tons of profit.
Nigerians are always in need of residential apartments, office buildings, and commercial outlets. They look to either buy or rent buildings and structures of their choice, and they sometimes need to consult a real estate agent or expert before making their choices.
This explains why the real estate industry abounds with business opportunities and has been ranked as the 5th largest contributor to the GDP of Africa’s largest economy.
However, real estate business is not an easy one at all. Rife with competition from old players, it can be a tough business to break into as a newcomer.
In order to be successful in this industry, one should have good knowledge and information in this field. This basic guide will equip you with the knowledge and information you need to acquire to start your own very successful real estate business in Nigeria.
The Real Estate Business
“Real estate is an imperishable asset, ever-increasing in value. It is the most solid security that human ingenuity has devised. It is the basis for all security and about the only indestructible security.” – Russel Sage, American financier, and politician.
What is real estate? Real estate is properties comprising land and buildings. The real estate business deals with the buying, selling, management, and investing of these properties.
As a real estate business owner, there are several niches in the industry that you can take part in. A real estate business can realistically be launched with little to no money all the way up to billions of naira. It all depends on what niche you choose.
Here are the main ones:
Real Estate Agents
Real estate agents can also be called real estate brokers or realtors. These individuals are licensed professionals who serve as middlemen between buyers and sellers of real estate, acting as representatives during negotiation. When a sale is made, the agent receives a commission i.e. a percentage of the property’s purchase price. Therefore, as a real estate agent, how much you make depends on how many deals you are able to close.
Land Reseller (Land Flipping)
As a land reseller, you buy land or property at a lower rate and then resell when the property has appreciated in value. This strategy requires knowledge of land appreciation patterns as well as a lot of money. However, it can pay off extremely well in a few years.
Real Estate Development/Property Development
Another field in the real estate sector is property development. As a property developer, you basically buy an undeveloped property and repurpose them into commercial centres or luxury accommodation. This too requires a sizable amount of capital to start, even more so than land flipping.
Similar to the previous niche, in property leasing, you buy some property or erect a building and lease or rent it out. To succeed in this business, it is important to buy a building in a location where it would be easy to find tenants. In Nigeria, most building owners or landlords ask for rent on a yearly basis. Furthermore, you can always sell this property at a high profit, if desired.
Blogging About Real Estate
Finally, if you enjoy writing, offering commentary on the world, and discussing finance, blogging about the real estate industry is another niche you could venture into. There are always people willing to learn the ins and outs of the business.
To run a real estate business with success you need two important skills. The first is networking. As an agent, developer, or landlord you will need to source for the property, tenants, buyers, and sellers, and networking, both in-person and online is invaluable. The second is online research. You will need to hone your ability to find credible information on the internet and how to apply it to your work.
Next, let’s move on to the core of it: how to start a real estate business.
Start A Real Estate Business
Have a strategic business plan
You need to strategically plan your business to be able to conquer this market. Real estate investing is just like starting any other career in which you can’t start on a whim without having a specific business plan in mind.
A business plan is vital for any real estate investor, and one of the best advice you’ll get in the housing market is to start out small and plan, plan, plan! This step is especially important if you’re planning on becoming a real estate investor for the long term. In this case, you want to grow your real estate investment portfolio strategically.
Choose Your Niche
To pick a niche of operation in the real estate business, you’ll need to do some research. In the previous section, we gave concise descriptions of the different niches in the real estate industry. On your part, you must go further to discover exactly what is best suited for your preferred lifestyle and your professional goals.
Now, we’ll go into deeper detail about 2 highly profitable occupations in the real estate industry: real estate developer and real estate agent.
Real Estate Developer
Developers co-ordinate all the activities involved in estate development, from land acquisition to architectural design, landscaping, and building construction. Note, however, that real estate development companies are different from building construction companies. Although, there is some overlap.
Furthermore, while developers are vulnerable to most risk in the real estate business, they have the most to gain.
In summary, as a real estate developer you:
Purchase or source for land.
Develop the building program and architectural design: employing a contractor and architect.
Obtain the necessary building licenses and capital
Supervise erecting the buildings
Develop a marketing strategy for the property
Rent out, manage or sell the property
As we mentioned before, this niche is very capital intensive, but as we’ll see in the next few steps, there are several ways to obtain the necessary funding.
Real Estate Agent
Real estate agents act as representatives during real estate negotiations. Essentially, they find buyers who need to buy and connect them with sellers who plan to sell, serving as middlemen. They receive a commission for every sale they make, or if working with a team of other agents, split the commission.
In Nigeria, most agents receive a commission of up to 10% of the total proceeds of the sale, purchase price, or rental value of the property. If you close a deal of N100 million, you earn N10 million.
Operating As a Real Estate Agent
Once you’ve signed a listing contract with someone looking to sell a piece of real estate, you start looking for people looking to buy at the highest purchasing price and with the best terms for the seller. This is a typical operation for a real estate agent:
Make a listing that the property is for sale using the internet, fliers, billboards, or newspaper ads.
Place “For Sale” or “For Lease” signs on the property along with your contact information.
Advertise the property using social media, Google ads, and fliers.
Be available to answer any questions the buyers have about the property and to show them around during a visit or inspection.
Negotiate the highest and most reasonable price on behalf of the seller.
Carry out background checks on the buyers and make sure that they are financially qualified to buy the property.
Close the deal.
Before settling on a niche, you must know the answers to these questions:
How does the sector work?
What does a job well-done look like?
Who are some of the big players?
What laws and licensing regulate the real estate business in my state/city of choice?
Register Your Business
The first step to structuring your business is to register it with the Corporate Affairs Commission (CAC) and get a certificate of incorporation. This is especially important in the real estate business. One benefit of registering your business is that you will be able to open a corporate account into which customers can make payments. Additionally, it will make you appear more reputable to both buyers and sellers alike.
Run a name search on CAC’s portal to begin the process. This is to make sure that your chosen company name has not been registered by another person. Afterward, you can begin the registration process. With basic information like a valid ID card, passport photographs, personal documentation, and a signature, you are all set
Alternatively, you could hire a lawyer to help you register your business. ReDahlia can help you speed up the registration process and will promptly mail your certificate to any address.
Additionally, register with real estate associations like the Association of Estate Agents in Nigeria (AEAN), Real Estate Developers Associations of Nigeria (REDAN), and the Nigerian Institution of Estate Surveyors and Valuers (NIESV).
Draft A Business Plan
Next, create a strong business plan. A business plandetails the long and short-term objectives of your business and how these objectives can be achieved.
While writing your business plan, carry out a thorough feasibility study, and do some market research to understand the nature of the business. Learn about the competition, consumer trends, demand and supply patterns, prevailing prices, and what target audience to focus on.
Include the following information in your plan:
Fund Your Business Real Estate Business
Depending on what niche you decide to go into in the real estate business, start-up capital can range from little money to billions of naira. There are several ways to fund your real estate business:
Fund it from your personal savings.
Seek out investors or venture capitalists with your business plan, marketing strategy, and growth proposal. These venture capitalists might be interested in sponsoring your business for a percentage of the profit or company equity.
Especially in real estate development, the mortgaging method is a pretty useful option. However, high-interest rates can make this method unattractive to developers.
In the mortgage method you pay a small percentage of the total purchase price for a property. The rest of the price is paid overtime with interest. Usually, a mortgage bank becomes involved.
Partnership is very common in this sector and is extremely beneficial to all parties. According to Fortune builders, “[In the real estate investing], what one investor lacks, the other can make up for… Many partnerships will entail one partner finding a distressed property at a discounted price, while the other one uses their credit score and working capital to finance it; just make sure everyone is bringing something to the table.”
Joint Ventures too are another aspect of partnership.Here, a landowner provides her/his land as equity and a developer brings in funding from her/his own pocket or from a third-party sponsor.
Rather than pay the owner for their land, the investor finances the construction of a project they have all agreed upon. This could be luxury apartments, a resort, units of houses, and so on. Upon completion of the project, the developer or investor pays the landowner a percentage of the revenue as decided on the Joint Ventures agreement. Basically, all parties (investor, developer, and landowner) form a joint partnership to set up the estate, and everyone goes home happy!
Marketing And Branding Your Real Estate Business
To succeed in this business, you need a solid marketing plan! If no one knows what a capable developer or agent you are, your business remains stagnant.
In order to attract a large client base, you absolutely must make use of these modes of marketing:
Online marketing (social media, Google ads, etc.)
Word of mouth
Also, make sure to set up your real estate business website as soon as possible. On this site, you can build up your brand, blog about your experiences in the real estate world, and reach a wide audience all over the world!
Your website should be interactive and engaging, permitting clients to enquire about your services and to see photos and videos of available property.
As an investor or aspiring entrepreneur, the real estate sector is a gold mine for investors. Also, there’s a little something for entrepreneurs of any financial ability! Whether you want to work as a developer, agent, or land reseller, the industry is dynamic and profitable. In the words of Louis Glickman, “The best investment on Earth is earth.”